Inclusionary Affordable Housing Program Section 415 Proposed Amendments Informational Hearing Planning Commission March 16, 2017
AFFORDABLE HOUSING CONTEXT INCLUSIONARY HOUSING PROGRAM ECONOMIC FEASIBILITY STUDY PROPOSED AMENDMENTS POLICY CONSIDERATIONS IMPLEMENTATION CONSIDERATIONS
AFFORDABLE HOUSING CONTEXT Affordable Need Affordable Production INCLUSIONARY HOUSING PROGRAM ECONOMIC FEASIBILITY STUDY PROPOSED AMENDMENTS POLICY CONSIDERATIONS IMPLEMENTATION CONSIDERATIONS
AFFORDABLE HOUSING NEED WHO IS AFFORDABLE HOUSING FOR? 4
AFFORDABLE HOUSING NEED ARE WE MEETING THE NEED? 30,000 25,000 RHNA Targets and Production 1999-2014 Unmet RHNA 20,000 15,000 10,000 Production in Addition to RHNA 5,000 - Very Low: 0-50% AMI Low: 50-80% AMI Moderate (80-120% AMI) Above Moderate (120%+ AMI) Production Toward RHNA Target 5
AFFORDABLE HOUSING NEED WHAT HOUSEHOLDS ARE WE LOSING? 400,000 350,000 300,000 250,000 Above Middle (140%+) Middle (120-140%) 200,000 150,000 100,000 50,000-1990 2000 2005-2006 2009-2010 2014-2015 Moderate (80-120%) Low (50-80%) Very Low (50% or less) 6
AFFORDABLE HOUSING PRODUCTION Units Existing Today Low Income Units (60% AMI or below) Moderate Income Units (~80-120% AMI) Middle Income Units (> 120% AMI) MOHCD Portfolio 15,732 3,676 0 Public Housing (RAD & HOPESF Affordable) 6,455 0 0 MOHCD Small Sites Program 137 0 Inclusionary Units 1,611 1,092 23 DALP Program 12 298 22 Total 23,810 5,203 45 81.9% 17.9% 0.2%
AFFORDABLE HOUSING NEED LEAST SERVED NEED MOHCD 100% Affordable Projects and SFHA Public Housing Least served need 8
AFFORDABLE HOUSING CONTEXT INCLUSIONARY HOUSING PROGRAM History Legal Nexus Program Summary ECONOMIC FEASIBILITY STUDY PROPOSED AMENDMENTS POLICY CONSIDERATIONS IMPLEMENTATION CONSIDERATIONS
INCLUSIONARY PROGRAM HOW DOES IT FIT IN? ~20% of total funding for low-income affordable housing Provides on-site affordable units in real time, helping to create mixed-income neighborhoods Flexibility in who it can help market dollars can be leveraged to fill gaps for households that City cannot fund Depends completely on market rate production if development isn t feasible, inclusionary units are forgone 10
INCLUSIONARY PROGRAM PROGRAM HISTORY 2002 Inclusionary Housing Ordinance 2007 Nexus Study 2012 Affordable Housing Trust Fund 2016 Proposition C, revised Nexus Study 11
INCLUSIONARY PROGRAM RESIDENTIAL NEXUS STUDY (2016) Establishes a legal nexus between market-rate development and the need for affordable housing Maximum legal requirement (2016): 31.8% Rental for rental units Ownership 37.6% 31.8% for ownership 37.6% units Maximum feasible requirement determined by Controller s Economic Feasibility Study (2016) 12
AFFORDABLE HOUSING CONTEXT INCLUSIONARY HOUSING PROGRAM History Legal Nexus Program Summary ECONOMIC FEASIBILITY STUDY PROPOSED AMENDMENTS POLICY CONSIDERATIONS IMPLEMENTATION CONSIDERATIONS
INCLUSIONARY PROGRAM - TODAY 1. APPLICATION Smaller Projects Larger Projects 10 24 units 25 or more units 14
INCLUSIONARY PROGRAM - TODAY 2. ALTERNATIVES Smaller Projects Larger Projects Affordable Housing Fee 20% of total units x per unit fee 33% of total units x per unit fee Off-Site Alternative On-Site Alternative: 20% off-site (at low-income) 12% on-site (at low-income) 33% off-site (at low/moderate income) 25% on-site (at low/moderate income) 15
INCLUSIONARY PROGRAM - TODAY 3. INCOME LEVELS Low-income tier Smaller Projects 55% AMI (rental) / 80% AMI (owner) Larger Projects 55% AMI (rental) / 80% AMI (owner) Moderate-income tier N/A 100% AMI (rental) / 120% AMI (owner) 16
AFFORDABLE HOUSING CONTEXT INCLUSIONARY HOUSING PROGRAM ECONOMIC FEASIBILITY STUDY Findings and Recommendations PROPOSED AMENDMENTS POLICY CONSIDERATIONS IMPLEMENTATION CONSIDERATIONS
ECONOMIC FEASIBILITY STUDY 1. MAXIMUM FEASIBLE REQUIREMENT Rental Projects Ownership Projects Maximum Feasible On-Site Equivalent Fee or Off-Site 14% to 18% 18% to 23% 17% to 20% 25% to 28% Requirements above these amounts would be not economically feasible for typical projects 18
ECONOMIC FEASIBILITY STUDY 2. SCHEDULE OF ANNUAL INCREASES To allow land market to adjust to increased requirement 0.5% per year, for 15 years 3. AFFORDABLE HOUSING FEE UPDATE Fee methodology should be revisited to ensure it matches the actual cost to construct affordable units 19
ECONOMIC FEASIBILITY STUDY 4. STATE DENSITY BONUS LAW Use of State Bonus will impact Inclusionary Program Recommendations: Cannot assume all projects will use State Bonus Set inclusionary rates to be feasible for projects, assuming no use of State Bonus Direct projects that use State Bonus to pay Affordable Housing Fee on Bonus units 20
AFFORDABLE HOUSING CONTEXT INCLUSIONARY HOUSING PROGRAM ECONOMIC FEASIBILITY STUDY PROPOSED AMENDMENTS POLICY CONSIDERATIONS IMPLEMENTATION CONSIDERATIONS
PROPOSED AMENDMENTS - SUMMARY Application No change Inclusionary Requirements Increased on-site, off-site, and fee percentages Different requirements for rental vs ownership Changes to Affordable Housing Fee calculation and application Income Levels New definitions of income targets (i.e. low moderate income) Modified income targets (i.e. AMIs) Annual Increases State Density Bonus Law provisions Unit Mix Requirements 22
PROPOSED AMENDMENTS 1. ALTERNATIVES Proposal A Proposal B Smaller Projects No change No change Larger Projects Affordable Housing Fee/ Off-Site Alternative: Rental 30% (at low/moderate) Rental 23% (at average AMI) On-Site Alternative: Owner 33% (at low/moderate) Rental 24% (at low/moderate) Owner 27% (at low/moderate) Owner 28% (at average AMI) Rental 18% (at average AMI) Owner 20% (at average AMI) 23
PROPOSED AMENDMENTS 2. INCOME LEVELS Smaller Projects: Proposal A Required Averages: 55% AMI (rental) 80% AMI (owner) Proposal B Requirement: 80% AMI (rental) 120% AMI (owner) Larger Projects: Low-income tier: 55% AMI (rental) 80% AMI (owner) Moderate-income tier: 100% AMI (rental) 120% AMI (owner) Required Averages: 80% AMI (rental) 120% AMI (owner) 24
PROPOSED AMENDMENTS 3. AFFORDABLE HOUSING FEE Application of Fee Proposal A No change; per unit basis Proposal B Fee applied on a per gross square foot basis Calculation of Fee Calculate six separate fee amounts for low, mid, and high rise building types, for rental and for owner Change to allow MOHCD to calculate fee based on actual cost to construct BMR units 25
PROPOSED AMENDMENTS 4. ANNUAL INCREASES Proposal A 0.75% annual increase Starting 2018 Ending at legal nexus: 31.8% (rental) 37.6% (owner) Sunset 2 years after entitlement Proposal B 0.5% annual increase Starting 2019 Ending at specified maximum rates 23% / 28% (rental, on/off-site) 25% / 33% (owner, on/off-site) Sunset 3 years after entitlement 26
PROPOSED AMENDMENTS 5. STATE DENSITY BONUS LAW Additional Provisions Proposal A Reasonable documentation required from applicants Planning Department required to estimate value of Bonus Planning Department required to produce annual report on use of Bonus. Proposal B On-Site projects would pay Affordable Housing Fee on Bonus units. 27
PROPOSED AMENDMENTS 6. UNIT MIX REQUIREMENTS Proposal A Proposal B For all On-Site Alternative projects: For all non-plan Area projects: 40% two-bedrooms AND 20% three-bedrooms of On-Site BMR units 25% two-bedrooms OR 10% three-bedrooms of total units *new Planning Code Section 207.7 28
AFFORDABLE HOUSING CONTEXT INCLUSIONARY HOUSING PROGRAM ECONOMIC FEASIBILITY STUDY PROPOSED AMENDMENTS POLICY CONSIDERATIONS IMPLEMENTATION CONSIDERATIONS
POLICY CONSIDERATIONS 1. PROJECT FEASIBILITY Would either proposal cause typical projects to become economically infeasible? Maximum Feasible On-Site Alternative Rental: 14% - 18% Owner: 17% - 20% Proposal A* Rental: 24% Owner: 27% Proposal B Rental: 18% Owner: 20% Fee/Off-Site Alternative Rental: 18% - 23% Owner: 25% - 28% Rental: 30% Owner: 33% Rental: 23% Owner: 28% * Proposal A rates require use of State Bonus to maintain feasibility 30
POLICY CONSIDERATIONS 2. REQUIREMENT ALTERNATIVES Would either proposal pose a financial incentive to pay the Affordable Housing Fee vs. On-Site Alternative? Proposal A* Proposal B Rental Projects: No incentive between 24% on-site or 30% fee No incentive between 18% on-site or 23% fee Owner Projects: Incentive for 33% fee over 27% on-site No incentive between 20% on-site or 28% fee * Proposal A incentives may be impacted by use of State Bonus 31
POLICY CONSIDERATIONS 3. HOUSING PRODUCTION & HOUSING COST How will proposals impact housing production and cost? Both proposals: increase in BMRs, but a net decrease in housing production, causing increase in housing costs. Proposal A: higher requirements yield greater BMR production, but a larger net decrease in housing production and larger increase in housing costs. 32
POLICY CONSIDERATIONS 4. HOUSEHOLDS SERVED Proposal A Proposal B Smaller Projects: Average Served: Average Served: 55% AMI (rental) 80% AMI (owner) 80% AMI (rental) 120% AMI (owner) Larger Projects: Average Served: 72% AMI (rental) 98% AMI (owner) Average Served: 80% AMI (rental) 120% AMI (owner) 33
POLICY CONSIDERATIONS 4. HOUSEHOLDS SERVED Served by MOHCD 100% Affordable and SFHA Public Housing Least served need 34
POLICY CONSIDERATIONS 6. AFFORDABLE HOUSING FEE APPLICATION How would the fee be applied to projects? Proposal A: Projects would continue to pay a fee based on unit mix rather than actual unit size. Proposal B: Projects would pay proportionally to actual unit size (gsf). 35
POLICY CONSIDERATIONS 6. AFFORDABLE HOUSING FEE CALCULATION How would the fee be calculated? Proposal A: MOHCD would not be able to calculate the fee as directed. Revenue impact not clear. Proposal B Fee to match real cost to construct affordable units Would generate greater revenue to Affordable Housing Fund than current method. 36
POLICY CONSIDERATIONS 7. STATE DENSITY BONUS LAW Should Inclusionary Program assume that all projects will receive a Density Bonus? Considerations: Construction type Environmental review Fee or Off-Site Alternatives Community context Site constraints Market absorption Few projects to date 37
POLICY CONSIDERATIONS 7. STATE DENSITY BONUS LAW Would projects be eligible for the maximum 35% Bonus? Maximum Bonus Available: Proposal A Rental: 23% - 27.5% max. bonus Proposal B 23% max. bonus Owner: 7% - 14% max. bonus 7% - 8% max. bonus 38
POLICY CONSIDERATIONS 7. STATE DENSITY BONUS LAW How would the State Bonus Law impact each proposal? Proposal A: Typical projects must receive maximum Bonus to be economically feasible. Proposal B: Typical projects would be economically feasible, with or without maximum Bonus. Bonus projects would provide on-site units and contribute to Affordable Housing Fund. 39
POLICY CONSIDERATIONS 8. PROPOSED HOME SF PROGRAM How would HOME SF interact with each proposal? Proposal A: Relies on State Density Bonus Law to increase density, moderate-income housing, family housing Proposal B: Pairs with HOME SF to increase density, moderateincome housing, family housing, with specific provision to moderate building massing 40
POLICY CONSIDERATIONS 9. UNIT MIX REQUIREMENT Would proposals produce more family housing? Most 2 and 3-bedroom units are not occupied by families Larger units are less affordable Families often choose smaller units to reduce cost Market produces 30% 2-bedrooms, 10% 3+ bedrooms Implementation challenges - comparability of units Family-friendly features beyond unit size 41
AFFORDABLE HOUSING CONTEXT INCLUSIONARY HOUSING PROGRAM ECONOMIC FEASIBILITY STUDY PROPOSED AMENDMENTS POLICY CONSIDERATIONS IMPLEMENTATION CONSIDERATIONS
IMPLEMENTATION CONSIDERATIONS Designation of BMR units AMI tiers, averages, and ranges Dwelling mix requirements Condo conversion Tracking Conversion fee Affordable Housing Fee calculation Annual requirement increases Grandfathering and specific areas (UMUs) 43
THANK YOU jacob.bintliff@sfgov.org 415.575.9170 44